The fact that the U.S. Department of Justice has instigated legal action against Apple and a number of major publishers is an interesting development. This has been much commented on, but many of the comments give the impression that it is the agency agreement basis of trading that is under attack.
As I understand it, it’s not the agency pricing model that is the basis of the legal action. All of us Indie publishers operate on an agency pricing basis with Kindle books – we set the prices and Amazon takes an agent’s commission for acting as a conduit for our digital books. It seems a perfectly sensible way of operating.
The legal action is actually based on the claim that before supplying books via Apple on the agency basis the big five publishers colluded and agreed to undertake price-fixing. It’s a claim that Penguin and Macmillan flatly deny. It will be interesting to see how the court case progresses.
What always struck me as odd is that when ebooks became available the major publishers supplied them to Amazon under the wholesale agreement that applied to print copies. It seemed to me that the product was so utterly different in the way it is distributed to the consumer that the supply should have been subject to a different form of agreement from the outset. I read that, rather belatedly, publishers are now refusing to renew their existing annual agreements with Amazon.
Apart from the sales model, there are many complaints from consumers about the prices charged by mainstream publishers for ebooks. The feeling is that with no printing or warehousing costs and with very low distribution costs, the price should be a small percentage of the printed copy price. The publishers still have to cover their basic admin costs (submissions, selection, editing, proofreading, formatting, artwork, marketing, accounts, royalties), and instead of printing and warehousing, they have to pay for the creation of the digital files in different formats and IT delivery systems. They are also stuck with the bizarre position that ebooks, unlike print copies, are subject to VAT, which in the UK adds 20% to the price. All they are doing is sharing their costs over both print and digital editions – and trying to make a reasonable profit.
I very much doubt if mainstream publishers feel that they have to price-match Indie publishers. They feel that they are offering a product that the buying public will perceive as superior – in much the same way that BMW doesn’t worry about price-matching with Fiat. But books aren’t cars and it’s a superiority complex that may prove costly.
Eventually the pricing of ebooks will settle down. Currently the pricing of the books is being used as a marketing weapon in the ebook reader wars. It makes me laugh when I see the W H Smith Kobo advertising campaign. Here we have a bookseller telling its customers that if they buy an ebook reader they will have access to 1,000,000 free books. What sort of business plan is that for a bookseller?
There’s no money for Amazon, either, in giving away books. I don’t think it will be long before the only free books are the out-of-copyright classics.
“May you live in interesting times” is a Chinese curse that has come to pass for authors/publishers.
Still, mustn’t worry about these things. The appalling weather means that most of our small boat fishing fleet hasn’t put to sea, so Brixham’s pubs should.l be pleasantly busy – I’m off to find out.